Rishi Sunak has been accused of a “desperate” briefing on inheritance tax (IHT) after reports suggested it would be slashed ahead of the next election.
It comes as the government confirmed the date of the next spring budget, which will be delivered on 6 March.
With a general election looming next year, Mr Sunak will be under pressure from Tory MPs to announce tax cuts to boost their chances of victory.
On Wednesday, The Daily Telegraph reported that Downing Street is considering axing IHT as part of a “gear change” on tax, having made halving inflation rather than reducing the tax burden a priority of his premiership.
However, Labour rubbished the story as a “desperate briefing from a desperate prime minister who is spending his Christmas break trying to keep Tory MPs on side”.
James Murray, Labour’s shadow financial secretary to the Treasury, said: “There have been 25 Tory tax rises since the last election.
“Now at a time when families across Britain are struggling with the cost of living and our NHS is on its knees, Rishi Sunak is trying to buy off his backbenchers with an unfunded tax cut for millionaires.”
On speculation that the date of the budget could mean a spring or summer general election is more likely, Mr Murray said Labour “will be ready” for a vote “whenever it comes”.
Inheritance tax is hated by many Conservative MPs and there has long been briefings it could be scrapped.
The prospect is often raised when the party is facing political difficulty, with similar reports emerging back in July ahead of three by-elections the Tories were predicted to lose. (In the end, they lost two out of three).
The Telegraph, which is campaigning to abolish IHT, said scrapping it is one of a handful of major tax cuts that have been discussed by senior figures in Number 10.
Downing Street called the report “speculation” and refused to comment further.
However, the prime minister’s official spokeswoman said “the vast majority of estates don’t pay inheritance tax” and it is forecast to contribute “almost £10bn a year” by 2028-9 to fund public services.
Around 4% of people pay inheritance tax. At present it is charged at 40% and applies to estates worth more than £325,000, but there are allowances that can mean it’s only paid on more valuable estates.
Those in favour of the tax say it is important for social mobility and abolishing it would be a giveaway for the wealthiest minority.
However, some Conservative MPs who want to see it scrapped call it a “death tax” because it applies to earnings that have already been taxed.
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Others have called for it to be reformed rather than scrapped, with experts pointing out exemption thresholds allow many couples to pass on up to £1m tax-free.
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Nick Fletcher, a 2019 Conservative MP who represents Don Valley, told Sky News that he would rather see changes to National Insurance, VAT or income tax ahead of IHT as it will have a greater impact.
But all tax cuts are welcome, he said.
Mr Fletcher also said that building more houses and restricting immigration would make more sense to address the housing shortage, instead of incentivising the buying of existing stock as suggested by Housing Secretary Michael Gove.
Cutting inheritance tax would likely create a dividing line with Labour, which is unlikely to support such a measure.
Labour is enjoying a healthy 20-point lead in the polls, and with an election needing to be held by January 2025 at the latest, the spring budget will be one of Mr Hunt’s last chances to announce giveaways that could woo voters.
Today it was also reported that the government could announce support for first-time buyers before polling day, which may include reducing the upfront cost of a home with a scheme for longer, fixed-rate mortgages.
Budget ‘last throw of the dice’
However, Mr Murray said no matter what is announced, “the next budget will come after fourteen years of economic failure under the Conservatives that have left working people worse off”.
The Lib Dems also said it was “too late to turn the tide” and called it a “last throw of the dice by a flailing Conservative government”.
Mr Hunt began to ease the historically high tax burden in his autumn statement, including by cutting national insurance.
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But millions of workers will still face a squeeze on their finances as the tax burden remains at record high, with a freeze on thresholds still in place.
Ahead of the budget, the chancellor has commissioned the Office for Budget Responsibility (OBR) to prepare an economic and fiscal forecast to be presented to parliament alongside the statement.
This is standard practice before major fiscal events.
The lack of an OBR forecast at his predecessor Kwasi Kwarteng’s mini-budget in September 2022 spooked the markets and sparked a huge economic fallout, pushing up government borrowing costs and putting certain pension funds on the brink of collapse.
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